BP Says Oil Spill Clean-up Costs $3.95 Bln To Date - Update

7/19/2010 7:07 AM ET

BP Plc (BP,BP.L) Monday said that the cost of response for the Gulf of Mexico oil spill has reached $3.95 billion to date.

Meanwhile, reports stated that talks between BP and independent oil and gas producer Apache Corp. (APA) regarding BP's potential sale of half of its stake in Alaska's Prudhoe Bay oil field to Apache stalled over the weekend, raising concerns over the completion of the transaction.

The talks between the companies reportedly halted over issues ranging from the valuation of the deal to how current and future legal liabilities will be addressed.

Houston-based Apache was reportedly negotiating with BP to buy half of the Prudhoe stake for between $10 billion and $11 billion in an all-cash transaction. The asset sale to Apache was seen as one of the options BP is exploring in a broad capital-raising effort.

The transaction is expected to provide BP with relief from the financial stress of paying for the clean-up of the oil spill in the Gulf of Mexico. The group has already scrapped its dividend and trimmed capital spending.

Bloomberg reported last week that Abu Dhabi's crown prince Sheikh Mohammed bin Zayed Al-Nahyan said the Emirate is considering an investment in BP. "We are still thinking about it," the report quoted him as said in an interview. BP's Chief Executive Tony Hayward had reportedly visited Abu Dhabi last week.

Providing an update on the MC252 oil well incident, BP today stated that the well integrity test is continuing. The pressure inside the well has been measured at about 6,792 pounds per square inch and it continues to rise slowly.

The company said it is carrying out extensive monitoring activities around the well site as directed by the National Incident Commander. Further, the company said that the information gathered during the test is being reviewed with the government agencies, including the Federal Science Team, to determine next steps. Based on the test results and monitoring activities, further steps may include the extension of the test or return to containment options.

According to the company, the three ram capping stack has been closed during the test, shutting in the well. All sub-sea containment systems namely, the Q4000 and Helix Producer have been temporarily suspended.

If the company concludes the test, the Helix Producer and the Q4000 are expected to resume capturing and flaring oil and gas. The company also plans for additional containment capacity and flexibility that are expected to ultimately increase recoverable oil volumes to 60,000 to 80,000 barrels per day or b/d.

As of July 18, the company's first relief well has reached a depth of 17,864 feet and the next scheduled operation is to carry out a ranging run. The well has approached its last casing end point. The company will use additional ranging runs to guide the drill bit to a MC252 well intercept point. After interception, the company expects to begin operations to kill the flow of oil and gas from the reservoir by pumping specialized heavy fluids down the relief well. The company continues to expect that the first half of August is the most possible date by which the first relief well will be completed and kill operations performed.

The company also stated that it has temporarily halted the second relief well, which started on May 16, to avoid interfering with the ranging runs being performed in the first relief well.

According to the company, about 43,100 personnel, more than 6,470 vessels and dozens of aircraft are engaged in the response effort to protect the shoreline of the Gulf of Mexico, and to collect and clean up any oil that has reached shore. Operations to skim oil have recovered a total of about 807,143 barrels or 33.9 million gallons of oily liquid.

BP also stated that almost 116,000 claims have been submitted to date and more than 67,500 payments have been made totaling $207 million. The cost of the response to date has reached $3.95 billion, including the cost of the spill response, containment, relief well drilling, grants to the Gulf states, claims paid, and federal costs. On June 16, BP had announced the creation of a $20 billion fund to satisfy certain obligations arising from the oil and gas spill.

BP closed Friday's trading at $37.10, up $1.82, on a volume of 50.51 million shares.

On the LSE, BP.L is trading at 399.20 pence, down 14 pence or 3.40%, on a volume of 30.96 million shares.